Regardless of age, becoming a real estate investor is frequently regarded as one of the hallmarks of individual financial success. While, technically, in the U. S. although there are certain age-related home-buying guidelines you should be aware of, there is no upper age limit for obtaining a mortgage.
When it comes to securing a loan many factors influence a lender’s decision including your age and income sources. But how much weight do these factors carry, and are there any limitations on how lenders can consider them? Let’s dive into the details.
Age: A Non-Discriminatory Factor
In the realm of lending age discrimination is illegal. Lenders cannot base their loan decisions solely on your age. This means they cannot automatically deny you a loan because you are young or nearing retirement. However, age can play a role in the assessment process but only in specific ways:
- Legal Contract Age: Lenders cannot offer loans to individuals below the legal age to enter into contracts, which varies by state.
- Credit Scoring Systems: Age can be factored into credit scoring systems, but only as long as it doesn’t disadvantage applicants over 62 years old. In fact, valid credit scoring systems may even favor applicants in this age group.
- Income and Retirement: A lender may consider your age in relation to your income and retirement plans. For instance, they might assess whether your income, including retirement income, will be sufficient to cover the loan throughout its term.
Income Sources: A Matter of Stability and Verification
Lenders are interested in the stability and verifiability of your income. They want to ensure you have the means to repay the loan. While they cannot discriminate based on the source of your income, they can consider the following:
- Part-Time Employment: Income from part-time jobs is generally accepted as a valid source of income for loan applications.
- Retirement Income: Annuities, pensions, and other retirement benefits are considered reliable sources of income and can be factored into loan approval decisions.
- Public Assistance Programs: Lenders cannot discount or refuse income from public assistance programs like Social Security, unemployment benefits, or food stamps. However, they can consider the amount and sustainability of this income.
The Bottom Line: A Holistic Approach
While age and income sources play a role in loan approvals, they are not the sole determinants. Lenders consider a range of factors, including your credit history, debt-to-income ratio, and employment stability. They are looking for borrowers who demonstrate a strong ability to repay the loan responsibly.
Additional Insights:
- Transparency is Key: Lenders should be transparent about how they use age and income information in their loan decisions.
- Discrimination is Unacceptable: If you believe you have been discriminated against based on your age or income source, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
- Seek Professional Advice: Consulting a financial advisor or mortgage professional can help you understand your loan options and navigate the application process.
Recall that when it comes to loan approvals, age and income are only two parts of the picture. You can set yourself up for a successful loan application by being aware of how these factors are taken into account as well as your general financial situation.
HOW YOUNG IS TOO YOUNG TO GET A MORTGAGE?
While age is not a reason for a lender to reject a mortgage application, state laws specify the age at which a contract can be negotiated. If you’re closer to high school graduation age than retirement, could age be a deterrent to getting a mortgage? For example, in Virginia, you must be 18 to enter into a legally binding contract, including a mortgage.
Your age may also affect your ability to meet other requirements for being approved for a mortgage loan.
Lenders evaluate your income to see that you have enough to make the mortgage payments. It’s improbable that you will work at a job where your salary is sufficient to qualify for a mortgage if you’re under 18 or even in your early 20s. Additionally, lenders usually require a certain credit history, so it’s possible that they don’t have enough credit history to meet their needs. This group is likely to include young people who haven’t had time to use credit cards or take out loans in order to establish a credit history.
Finally, homebuyers typically need to make a down payment. For example, the minimum down payment for a non-citizen is 30%. U. S. Citizens who live overseas and buy a second home or investment property may be able to downsize as little as 2010 percent of the time if they continue to maintain a U S. credit score.
HOW OLD IS TOO OLD TO GET A MORTGAGE?
Some people may be curious about any age restrictions associated with mortgages because they are legally binding agreements that let you finance the cost of a home over an extended period of time. Could a lender, for instance, refuse to allow you to take out a 30-year mortgage if you’re 75 years old? The average life expectancy in the US is 78 years old. 6, according to the Centers for Disease Control and Prevention.
The good news for seniors who want to purchase a home is that discrimination on the basis of age by a mortgage lender is illegal. The Civil Rights Act of 1964 gave rise to the Equal Credit Opportunity Act (ECOA), which prohibits lenders from denying credit to you on the basis of your age or any other factor, including race, color, religion, national origin, sex, or marital status. Additional protections are provided by the Fair Housing Act of 1968, which makes it illegal to discriminate in any residential real estate transaction.
However, there are some instances in which a lender could consider a lendee’s age indirectly. The Consumer Financial Protection Bureau states that a lender may consider whether you are nearing retirement age and base their decision on your ability to repay the loan. But once more, your ability to manage loan payments—rather than your age—is what disqualifies you in this case.
Banks have STOPPED LENDING
FAQ
Can you get a bank loan if you are over 70?
What is the maximum age to get a loan?
Is there an age limit on bank loans?
Can a bank deny a loan based on age?
Can a lender refuse to lend money to a young person?
A lender can refuse to lend money to someone who is too young to enter into a legal contract. State law controls the legal contract age and this may vary depending on the type of contract. Age can be used as part of a valid credit scoring system as long as it does not disfavor applicants 62 years old or older.
Can a lender loan you money based on your age?
If a lender decides not to loan you money just because of your age, they are discriminating illegally. Though it is illegal to discriminate based on age, it is true that many lenders will be less willing to lend to people who are very young or very old.
Can a lender or broker consider my age when deciding?
Can a lender or broker consider my age when deciding whether to give me a mortgage or home equity loan? Generally, a creditor such as a lender or broker cannot use your age to make credit decisions. However, there are exceptions to this rule. For example, age can be considered in a valid credit scoring system.